Written by Peter Fowler, COO at Lumi
It’s crucial for any issuer to have their ear to the ground when it comes to market manoeuvres and the shifting fortunes of financial performance. And keeping their eyes open to shareholder trends this AGM season will be particularly revealing.
Shareholding used to be mainly limited to a particular demographic in society, and the annual meeting was dominated by attendees with significant holdings. However, in recent years, the wind has clearly changed. Today, retail investors, encouraged into shareholding through easy-to-use trading apps, are a growing breed and increasingly diverse group.
Two in three women (67%) now invest in shares outside of their retirement accounts, while nearly a third of young, black shareholders have begun investing since 2020. Meanwhile a record 37% of Gen Z now invest in stocks.
Window of opportunity
Issuers need to be acutely aware of this group’s motivations, and AGMs are a key source of intelligence. While DIY platforms are paving the way for a younger generation to enter the investment landscape this is also translating into shareholder meetings. Four in five Gen-Z shareholders say they have already voted in an AGM, with another 9% interested in doing so.
This is a group that clearly wants to be heard, particularly on areas such as ESG and executive pay. While individually, they might only have a small stake in an organisation, together retail investors can be a powerful force. This was demonstrated most powerfully in the 2021 GameStop saga, where influencers on Reddit played a big role in driving the retailer’s share price into the stratosphere and damaging the bottom line of many short-selling hedge funds.
Thus, this group may need a much greater level of communication from companies to fully understand underlying company trends. In fact, investors are already crying out for more information – 85% want to see more information from the companies they invest in on the issues being discussed at the meeting, before they attend. In the modern era, documents informing shareholders of key information should be available as digital assets, to ensure that all shareholders have access, no matter which generation of investor they fall in to.
Technology bridges the gap
With a new diversity of shareholders, companies are also exploring more innovative ways to engage them. In 2023, hybrid AGMs comprised 40% of all meetings worldwide, and most UK meetings are expected to be hybrid this year.
We are now seeing issuers make hybrid meetings more inclusive through technology enabling virtual attendees to take part in debate using a virtual microphone or video, bridging the gap between them and in-person attendees. As well as enabling virtual contributors to be seen as well as heard, they allow AGM participants to categorise their contribution on submission, meaning they know they will be called upon to speak. Enabling remote shareholders to pose questions directly to the board creates an interactive and inclusive environment and results in a more informed and engaged investor community.
The engaged and hybrid audience of AGMs has implications for wealth management. With more virtual investors logging on, clients are going to be increasingly accepting of virtual solutions. The growing number of Gen-Z investors often get their news from online channels so these should be also utilised for advice sessions and presentations.
Activist insights
Involving shareholders not only means businesses can hear from the diverse voices of their investors, but it also means they can capture the rumble of a potential revolt.
Environmental, social and governance concerns are often a key catalyst for shareholder disquiet and last year banks, energy giants and even fast-food companies were in the firing line as the momentum around climate change drove shareholder activism worldwide. In 2024, however, consultancy firm Alavarez & Marsal predicts this year will see a dip in environmental and social campaigns, as other concerns – especially the use of generative AI – take centre stage.
Growing debate around the ethical use of AI has led to the UK Government crafting new legislation to regulate its use. This has already been reflected in some of this year’s AGMs, with high-profile tech businesses like Apple having to face questions and votes on their artificial intelligence strategy.
Organisations should keep abreast of this development – while remembering things turn around very quickly. Alvarez & Marsal’s research found that last year ESG activist campaigns proved considerably less lucrative than those which looked to deliver operational or strategic change. Here, as with AGMs, the bottom line remains the hottest topic.